Greggs adds to downbeat UK consumer outlook with profit warning

By James Davey

LONDON (Reuters) - British baker Greggs (GRG.L) warned on full year profit on Wednesday, blaming March's cold snap and waning consumer spending, hammering its shares and adding to concerns of slow UK growth.

Greggs shares fell as much as 19 percent after the firm said profit for 2018 was likely to fall short of expectations and be at a similar level to 2017.

The warning came as downbeat consumer surveys and recent data make a Bank of England rate hike this week unlikely.

Greggs, which sells sandwiches, sausage rolls and pastries from 1,883 shops, said severe wintry weather in March and April deterred shoppers from venturing out and prevented some of its shops from opening.

“Trading conditions in March and April have been very difficult in the market generally and Greggs is no exception to that,” Chief Executive Roger Whiteside told reporters.

Sales in May had started more strongly but still lagged the growth of January and February.

"Those customers that are coming are spending more...but there are just fewer of them out shopping and consumer spending underlying trends appear to be under pressure," said Whiteside.

Given the uncertainties over customer footfall Greggs is cautious on the outlook for sales across 2018.

The group, which is transforming itself from a conventional bakery business into a broader takeaway food retailer, said like-for-like sales at company-managed shops rose 1.3 percent in the first 18 weeks of the year - a slowdown from growth of 3.2 percent in the first eight weeks.

Prior to Wednesday's update analysts were on average forecasting a 2018 pretax profit before one off items of 87.1 million pounds according to Reuters data, up from 81.8 million pounds in 2017.

Shares in Greggs, which prior to the update had risen 17 percent year-on-year, were down 192 pence at 1,078 pence at 1006 GMT, valuing the business at 1.09 billion pounds.

"Guidance of 2018 profit at around the same level as 2017 implies around a 5 percent downgrade for the year, somewhat less than the share price reaction," said Paul Hickman, analyst at Edison Investment.

Separately on Wednesday a survey by the British Retail Consortium (BRC) said overall UK retail spending contracted by 3.1 percent year-on-year in April - the sharpest drop since its records began in 1995.

While the plunge largely reflected the earlier timing of the sales-boosting Easter holidays the BRC also warned of a weakening underlying trend.

Another survey from payments company Barclaycard also pointed to lacklustre consumer spending in April.

Already this year Toys R Us UK, electricals group Maplin and drinks wholesaler Conviviality have plunged into administration, while fashion retailer New Look and floor coverings retailer Carpetright (CPRC.L) are closing stores.

(Editing by Sarah Young and Alexandra Hudson)